Carmakers lower in Europe, oil dips

ASML lower, Nomura upgrades Nokia to neutral

By

KabirChibber

LONDON (MarketWatch) -- European shares edged higher Wednesday after a fall in crude oil prices and as investors absorbed the minutes of the latest Federal Reserve meeting, which eased fears of more aggressive hikes in U.S. interest rates.

U.S. shares were lower after weaker-than-expected March retail sales and several warnings in the technology sector. See Market Snapshot.

The euro was slightly higher against the dollar, last at $1.2894.

Carmakers were lower as March new car registrations in Western Europe dropped 3.7% on last year, the industry association ACEA said.

"While these figures are heavily influenced by the Easter break falling this year in the month of March... they also confirm the sluggish economic environment in the first quarter of 2005," the trade body said.

Peugeot (012150) shares slipped 1.7%, as registrations fell 9% and as Deutsche Bank cut the stock to hold from buy, saying it expects tough volumes in the first quarter for Peugeot in Western Europe. The broker also said it's taking note of anecdotal evidence that market conditions are becoming increasingly difficult both in terms of volumes and pricing.

Morgan Stanley said March was the most important month for European car volume, and the Western European car sales of 14.8 million units in March were a rebound from January and February.

"However, we do not expect the March selling rate to be sustainable and sees risks to our 1.5% growth forecast in 2005," the broker added.

Airlines were also lifted as May-dated crude oil futures fell below $51 a barrel as the International Energy Agency cut its world oil demand forecast.

ASML lower

Dutch chip equipment maker ASML Holdings
ASML, +3.28%
(33436) dropped 4.5% as it said the slow improvement in semiconductor fab capacity utilization makes "a sharp recovery of the industry unlikely in 2005," and said it remained cautious of its visibility beyond the third quarter. See full story.

ASML posted a surge in net profit for the first quarter to 100 million euros from 21 million euros. Net sales rose 51% to 685 million euros, below forecasts around 713 million to 751 million euros, according to an AFX News poll.

Looking ahead, ASML said it expects order intake in the current quarter to be lower than in the March-ending quarter's order intake.

Finnish mobile phone maker Nokia
NOK, +2.17%
shares rose 0.9% in Helsinki trade as Nomura was upgraded to neutral from reduce, saying it thinks the worst is over but the transformation is not yet complete.

"We don't expect that Nokia's new strategy (the s-curve) will be fully active until 2006, but in the meantime we think that Nokia should be able to hang onto the share it has regained in a flat handset market," analyst Richard Windsor said.

Nomura said it could no longer justify a reduce recommendation, but also remained unable to see "significant upside without strong market growth."

French retailer Carrefour (012017) shares gained 1.9% to 41.75 euros as it said overnight sales in the first quarter rose 3.9% to 19.59 billion euros with same-store sales up 1.8%. Sales in France rose 0.9% in the quarter to 9.38 billion euros. The retailer said it now had 11,261 stores in its portfolio, and remained on track to deliver at least one million square meters of new space in 2005, as it had previously stated.

ANM Amro raised its price target to 45 euros from 43 euros, saying Carrefour has shown "stronger progress than we expected" in the French hypermarkets. "It is not news that visibility on 2005 earnings is limited, but it is increasingly clearer that Carrefour is making the right decisions, and this not only French hypermarkets, but more generally throughout the group," the broker added.

Shares in U.K. building materials supplier Hanson (HNS) rose 1.6% to be one of the biggest gainers in the FTSE 100, after sharp rises in U.S. asbestos-related stocks overnight. These stocks surged after Pennsylvania Republican Senator Arlen Specter said a bill establishing a national fund to compensate asbestos claimants would soon be introduced. See full story.

Following recent comments from Hanson's Australian peer Rinker and the evolving asbestos situation in the U.S., analysts at Credit Suisse First Boston said: "We feel there is a chance of a short-term positive move in the stock - and would flag this up to more short-term clients."

J.P. Morgan will be selling the stake to institutional investors, and Fininvest will continue to hold 34.3% of Mediaset after the sale. Berlusconi has been criticized for conflicts of interest for his ownership of Italian media interests.

Burberry, JJB Sports

At opposite ends of the retail spectrum in the U.K., luxury goods company Burberry (BRBY) and struggling sporting goods retailer JJB Sports (JJB) both declined after reporting results.

Luxury retailer Burberry Group fell 1.2% as it said wholesale revenue the first half will be broadly flat and saw more moderate licensing revenue growth compared to the second half of the March 31-ending fiscal year.

It said earnings before interest, tax, depreciation and amortization for the year ending March 31 will be ahead of expectations, coming in at least 162 million pounds.

JJB Sports, which had warned of slumping profits in January, slipped 1.2% as it reported comparable sales in its core JJB business down 1.2% in the 10 weeks ending April 10. For the year to Jan. 30, pretax profit slumped to 50.37 million pounds from 67.8 million pounds, with revenue falling 16.8% to 773.3 million pounds.

"It is quite clear that consumers have tightened their belt and that this is fuelling competition between retailers," the retailer said.

Broker action

German chemicals giant BASF
BF
(515100) fell 1.1% as Merrill Lynch downgraded it to neutral from buy on slowing demand. The broker told clients that while it remains comfortable with the long-term investment case and believes first-quarter results are likely to be strong, it's concerned that this could well signal "at least a temporary peak" in the company's earnings.

The broker also cut Belgian peer Solvay to sell from neutral, saying the deal to acquire Fournier could dilute earnings per share because of a significant amortization of intangibles.

Atos Origin (005173) slipped 1.6% as Merrill also cut the French information technology services company to sell from hold, saying it is concerned about the quality of its earnings. The broker said it believes free cash flow is the most appropriate metric value. However, Merrill said that Atos's guidance points to a 4.1% free cash flow yield in 2005, "which has little upside potential."

Also, French media and advertising group Havas
HAVS
(012188) added 2% after saying it's unable to consider the request of its largest shareholder, Vincent Bollore, for seats on the company's board before its next general meeting on June 9. The company said Bollore, who owns 20% of Havas, has failed to confirm whether he wants to nominate directors on the board and to provide their names.

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